Miramax Circumvents 'Kids' Controversy : Movies: Independent company is set up to distribute the graphic teen film, avoiding potential problem for the Disney-owned firm.

To sidestep potential conflict with Miramax Films' family-oriented parent corporation, the Walt Disney Co., Miramax co-chairmen Harvey and Bob Weinstein have set up an independent releasing company to market and distribute the controversial "Kids"--Larry Clark's graphic portrayal of a day in the life of some amoral, sex-obsessed New York City teens.

Because the new company, Excalibur Films, is not a signatory of the Motion Picture Assn. of America, it is free to release the film unrated in the event it receives an NC-17 from the ratings board, to which it will be submitted within the next 10 days. And because the $6.5-million to $7-million investment--$3.5 million in worldwide rights plus the cost of prints and advertising--is being picked up by the Weinstein brothers, Disney's policy of not releasing NC-17 films isn't put to the test.

"Going out unrated takes the stigma off the film," Harvey Weinstein said. "It also enables us to circumvent theater chains that won't play NC-17 movies because of clauses in their lease and newspapers that won't run their ads. Because of these policies, we had to sell the Martin Lawrence NC-17-rated concert film 'You So Crazy' to [the Samuel] Goldwyn [Co.] last year. It went out unrated and generated 400 bookings. If it was NC-17, they would have gotten 50."

"Kids," written by 21-year-old Harmony Korine and acted by non-professionals, tracks Telly--a 17-year-old "virgin surgeon"--through a day spiced up by shoplifting, drug deals and sexual conquest. Though nudity is limited, the camera records a panopoly of bodily functions, senseless violence and nonstop decadence in a world in which AIDS is barely an afterthought.

It is slated for release in New York on July 21 and will expand to 35 markets, including Los Angeles, a week later.

Though "Kids" is almost certain to receive an NC-17, Eamonn Bowles--a former vice president at Goldwyn involved in the release of the Lawrence film and the new chief operating officer of Excalibur--says he'd give it an "R."

"There's nothing titillating or irresponsible about the movie," he said. "It's the concept and the reality that's so shocking."

Though "Kids" created a major buzz at January's Sundance Film Festival and drew a few glowing early reviews, the movie's reception at Cannes fell flat. Some viewers walked out of the screening, and attendance at the press conference was sparse.

Harvey Weinstein says that the material is tough but in the interest of a higher cause. According to latest government statistics cited by Excalibur, 48% of U.S. teens have had sexual intercourse by the 10th grade and 72% by graduation. Roughly half have had unprotected sex by age 19.

"All kids lie about wearing condoms," he said. "I did . . . but the consequences were less catastrophic then. 'Kids' is a hard-edged wake-up call.

"We expect Excalibur to be a one-shot deal . . . we're not in the NC-17 business," he continued. "But--with Disney's consent--we'll keep it going should another one arise. The company can help us defend ourselves better against the conservative right. It's protection for movies that have edge."

Harvey Weinstein denied that the purchase of the $2-million "Kids" in any way was intended to provoke a showdown with Disney, which purchased Miramax--the leading purveyor of adult art-house films--two years ago.

"Creating this company was the perfect solution--unprecedented as far as I know," he said. "It's the opposite of going head-on. Though we're at tremendous risk--losing Buena Vista's clout in the home video market and pay TV markets, if I were Disney, I'd have made the same decision. Especially in this political climate, they have a grand name and a reputation to protect."